Oof. Non-profit boards, amirite?

I work predominantly with non-profit organizations and toggle pretty regularly between projects enacted by the staff and projects enacted by the board. One thing I hear pretty consistently from both staff and board members is a general dissatisfaction with non-profit boards and their actions, inactions, or, most accurately, random applications of action.

I spend a not insignificant amount of time explaining to staff what is and isn’t normal for a board to do (this is not the same as appropriate or right) and teaching boards what they need to be doing to support their staff. Every board has a slightly nuanced difference, but it comes down to really one thing that helps inform all the other things.

Non-profit boards are for keeping the organization in compliance with the requirements to retain their non-profit status.

What does that mean exactly?

There are three parts to this:

  1. Follow laws for non-profit businesses
  2. Use funds in accordance with a non-profit tax exemption status
  3. Keep the organization doing what it told the IRS it is doing

Let’s work backwards.

Staying on Mission

This is a phrase we hear over and over again and it’s for good reason. When organizations file for non-profit status, the big thing the IRS is looking for is whether or not the company has been created for the financial benefit of a single person, family, or group of people, or if it is ultimately bettering a group larger than the founders. They do this by making you prove your mission is one of a better, higher cause and that you haven’t mismanaged money in the past or will do so in the future. They grant an org this status because of what it says it does and will do.

This is why your mission is so key. If you stray too far from it, the IRS can revoke your non-profit status and you could have to pay back taxes for all the years you weren’t operating as a non-profit, potentially also having ramifications for those who donated to you.

So boards that spend a lot of time talking about something being “on mission,” if the org is “staying on mission,” or asking leaders to explain how new plans are “in line with our mission” are actually doing the most important part of being a board. This is what keeps the organization tax exempt and can be a huge source of stress if the IRS doesn’t think you’re doing that.

Staying in Compliance

The first two parts really are coupled together. Part of abiding by the laws of non-profits includes using funds in ways deemed appropriate for non-profit orgs. This means you don’t use funds to buy private planes and giant parties…unless that is part of your mission and the IRS has said that’s ok (that’s why that mission thing is so important).

For many non-profit board members, they come in thinking they’re doing a good thing and helping a cause they love or a friend. But being on a board is work. You have to understand how a business works, and specifically how a non-profit business works. Using for-profit tools and ideas is rarely comparable and can actually cause a lot of problems when it comes to funding an organization appropriately or making decisions about furthering an organization’s scope or reach.

There are a TON of resources about being on a non-profit board, but my personal favorites are the Non-Profit Kit for Dummies book and the in-person Board and Leadership Workshops put on by the United Way.

Bottom line?

The point of a non-profit board is to keep the organization in compliance with it’s non-profit status, which mainly involves keeping it on mission as told to the IRS.